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The effects of increases in cigarette prices on cigarette consumption among smokers after the Master Settlement Agreement

Zhen Ma ()
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Zhen Ma: Misericordia University

Review of Economics of the Household, 2017, vol. 15, issue 4, 1177-1190

Abstract: Abstract This paper examines the impact of the large increases in cigarette prices after the Master Settlement Agreement on cigarette consumption among smokers by estimating a dynamic panel data model. I use system generalized method of moments estimator with fixed effects to address the unobserved heterogeneity and the initial conditions problem. I find that older smokers (aged 51 and older) are virtually unresponsive to price changes, and younger smokers (aged 50 and younger) are more price sensitive; women smokers might be more price responsive; and the overall estimated price elasticity for the full sample of smokers is −0.26. In addition, smoke-free air laws do not show significant effects.

Keywords: Cigarettes; Smoking; Price elasticity; Dynamic panel model; GMM (search for similar items in EconPapers)
JEL-codes: D12 I12 (search for similar items in EconPapers)
Date: 2017
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